SOUTH AFRICA – South Africa’s leading food producer, Tiger Brands, has adopted a strategic approach to navigate challenges arising from declining sales volumes, as revealed in its recent statement.
The company announced that it is initiating a review of spending and the number of brands it offers in response to a 1% year-on-year decline in group revenue for the four months ending January 31.
The decline in revenues is attributed to a substantial 8% drop in sales volumes across most segments, offset by a 7% price inflation.
This shift in consumer behaviour is a consequence of inflation, which has led consumers to reduce their spending, impacting Tiger Brands’ performance.
The company expects flat to lower operating income for the six months ending March 31.
Tiger Brands acknowledged that the current global trend of rising costs for raw materials, energy, and packaging is affecting consumer goods producers.
The situation has been further exacerbated by Russia’s invasion of Ukraine and the resulting supply chain disruptions caused by the ongoing pandemic.
In response to these challenges, Tiger Brands is implementing measures to maintain efficiency and streamline its operations.
The company highlighted the need to address increased costs by raising prices and acknowledged that despite a volume regression, improved factory efficiencies and price realizations helped to negate the impact on the gross margin percentage.
The company is also conducting a detailed review of its capital allocation framework and portfolio to enhance operational efficiency.
This involves a reduction in the number of products it sells, referred to as “stock keeping units” (SKUs), and streamlining its portfolio to reduce complexity.
Tjaart Kruger, the CEO of Tiger Brands, emphasized the importance of directing resources toward segments that generate or have the potential to generate the highest returns.
“This strategic move aligns with the company’s commitment to ensuring financial and human capital is optimally utilized.”
Meanwhile, in a bid to enhance its organizational structure, Tiger Brands announced a new operating model on Wednesday.
The simplified structure comprises six business units, each headed by newly appointed managing directors with credible leadership experience in the fast-moving consumer goods sector.
Despite the current challenges, Tiger Brands remained confident in its leadership and talent pipeline, as indicated by the CEO.
“The company’s proactive measures and strategic realignment underscore its commitment to adapt to market dynamics and emerge resilient in the face of economic uncertainties. A further update on the capital allocation framework and portfolio rationalization is expected later in the year.”
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